7 Tips for Buying Cryptocurrency Like a Pro

Investing in cryptocurrency is an excellent recommendation for anyone looking for a lucrative side hustle. With the industry projected to hit USD 1.9 billion by 2028, now is the most opportune time to set up a crypto venture.

However, cryptocurrency is notoriously volatile. Therefore, a robust investment strategy is necessary to reap big from the industry.

Fortunately for you, we’ve outlined the top seven tips for buying cryptocurrency like a professional.

1. Choose a Reputable Exchange Platform

With the proliferation of cryptocurrency exchanges in the recent past, choosing a credible website can pose a challenge for new investors.

First, insist on a duly licensed crypto exchange with a global reach. The platform should also enjoy impressive reviews from previous and current users. Pay special attention to feedback touching on the website’s exchange fees, support responsiveness, and prevalence of past security breaches.

Coins.xyz comes highly recommended when looking for a credible cryptocurrency exchange platform. The website maintains handy templates and tutorials on how to buy crypto, making it excellent for new traders. It’s duly licensed and caters to 18+ clients spread over 100 countries.

Moreover, the platform tends to support multiple digital coins, so you can diversify your crypto portfolio. Traders enjoy unhindered access to real-time crypto prices, historical data on their assets’ performance, and tons of invaluable market insights. With a sign-up bonus of 50 USDT, there can never be a better exchange to launch your cryptocurrency venture.

2. Pick a Resilient Coin

There are thousands of cryptocurrency coins at your disposal, and new ones are being minted every day. However, before purchasing a crypto coin, extensive research must be conducted on its resilience and performance.

Note that while some reputable exchange websites insure your crypto investments against fraud, cryptocurrencies, in general, aren’t backed by any hard assets or real cash flows. The only way to realize significant returns on investment (ROI) is to sell your coins at a higher price than you purchased them.

But considering the industry’s high volatility, your fortunes can change in a blink. A good practice is prioritizing established coins like Bitcoin, Ethereum, and Dogecoin. These coins have demonstrated resilience over the last year, as evidenced by their growing market capitalization and year-on-year (YOY) performance.

For instance, Ethereum’s price as of October 18, 20224 was $2,611.70, up from $2,602.08 the previous day and $1,565.06 a year ago.

3. Research a Coin Extensively

Besides market capitalization and YOY growth, there’s more to consider before adding a cryptocurrency to your investment portfolio.

First, understand the cryptocurrency’s use cases. While some digital currencies are used exclusively for speculative investments, others provide more functional utilities.

Actual coins typically serve as mediums for exchange. However, you can also diversify to crypto tokens, which support other functional applications like creating smart contracts.

Next, research cryptocurrency’s liquidity. Sometimes, the most promising coins aren’t supported by the biggest exchange platforms. That means only a handful of traders are aware or willing to invest in those assets. Buying such coins may be easy, but selling them can be painfully difficult.

4. Determine the Storage Medium

How you intend to store your cryptocurrency investments determines the choice of the coin and an exchange website.

Start by choosing between a hot and cold digital wallet. The principal difference is that hot wallets are connected to the internet through your computer devices. In contrast, cold wallets store your digital data offline through hardware storage devices like hard disks.

Security-wise, cold wallets are prone to data loss due to damage to the hardware storage devices, while hot wallets may come under attack if the hosting exchange gets breached.

If entrusting a custodial wallet to an exchange platform, insist on a website that implements cutting-edge cybersecurity protocols. Moreover, establish what happens to your investments if the exchange, unfortunately, goes bankrupt or suffers significant security breaches.

5. Establish the Investment Medium

The most straightforward way to profit from cryptocurrency trading is to sell your crypto assets for a higher price than when you purchased them.

However, you could explore other ingenious strategies like mining.

Mining cryptocurrencies involves several computers working simultaneously to create more cryptocurrencies by solving complex math problems and verifying transactions across a blockchain network. The process occurs within a proof-of-work (PoW) mechanism, in which crypto miners compete to solve encrypted problems to a block.

There’s also crypto staking, which utilizes proof-of-stake (PoS) protocols that let investors stake their coins for commissions. The idea of PoS is to lock coins in staking pools, making them available to more cryptocurrency traders.

6. Only Invest What You Can Afford To Lose

A common mistake among first-time crypto traders is buying cryptocurrencies based on the number of coins. Instead, experts recommend investing depending on the dollar amount, as cryptocurrencies vary significantly in price.

For instance, one Bitcoin currently goes for $67,583.73, while one EarthMeta is priced under $1. That means you may buy up to 67,000 EarthMeta for a single Bitcoin purchase.

More importantly, a coin’s price doesn’t always reflect its performance.

Bitcoin, for instance, has maintained a bull run over the last year, registering around a 140% increase in value. That’s in contrast to EarthMeta, which is still in its presale period, with the launch date set for October 22, 2024.

7. Don’t Forget the Law

Cryptocurrency is legal in many developed nations, including the United States, Canada, and the United Kingdom. However, China, Saudi Arabia, and several African countries have yet to open their doors to crypto investors. Therefore, it pays to understand your local laws before buying cryptocurrency.

It’s also worth noting that trading in cryptocurrency may be regulated in the United States if it;

1. Constitutes the sale of securities (such as mutual funds) under federal or state laws or
2. Renders the trader as a money services business (MSB).

Moreover, cryptocurrency laws may vary considerably across the states. Florida has particularly emerged as a crypto-friendly state since it doesn’t impose state income tax for individuals. Crypto traders only pay federal income tax.

However, despite a broadening legal landscape, many governments are still wary of cryptocurrencies, and crypto laws may change dramatically overnight. The trick is to stay updated on emerging industry trends and regulations.

Wrap Up

Buying cryptocurrency is a high-stake decision that calls for in-depth research and caution. A single investment can convert you into a dollar millionaire or plunge you deep into debt, depending on the industry’s dynamics.

The only way to reap hefty returns on investment is by implementing expert investment advice.

In the final analysis, remember that investing in the crypto market is like taking a massive gamble with a 50-50 success rate. Whichever direction the pendulum swings comes down to your investment strategy.